Milestones of 2015

Reviewing the year that has been

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Recent regulatory developments such as the new Companies Act, King III and future developments such as the Retail Distribution Review (RDR) and legislation on Twin Peaks have meant that many financial planners and senior executives had to devote a lot more of their attention to compliance issues. Strategic planning and client facing activities had to make way, to some degree, to ensure that companies and practices are compliant therefore reducing the risk of closing their doors or facing financial penalties for non-compliance. The dramatic increase in the speed of change, which is largely driven by developments in information technology, globalisation and the shift towards a knowledge-based economy, are putting organisations under relentless pressure to really understand the environment in which they are operating so that they can generate the options that will create future value and success.

Consumers of financial services are becoming more financially and technologically savvy which places financial planners and advisors under pressure to ensure they remain needed. 2015 has seen many activities around robo-advice, which is a result of more consumers looking to service their own needs through electronic platforms. Value proposition remains critically important for any client dealing with a financial planner and financial advisor. This is the one thing that will set you apart from thousands of other financial planning professionals in the same boat as you. You will attract clients for the right reasons – they will come for your service, your superior knowledge and your ability to assist them in achieving their life goals.

The regulatory environment is ever changing and the Financial Planning Institute (FPI) is excited to participate in shaping the future of the financial services industry to the betterment and benefit of consumers. RDR comes at a much needed time and aims to promote professionalism among registered representatives. In April 2015, PricewaterhouseCoopers (PwC) noted in their journal for African financial services that the regulatory and political environments in Africa remain challenging for financial service firms, but those that find effective ways to work within these constraints will come out on top. Although many financial planning service providers are already mainly fee based, there are still many financial advisors that operate fully on a commission basis. FPI, and the professional financial planners associated with it, welcomes the change to becoming totally fee-based in most instances, as this model will protect the consumer in the sense that it will drive full disclosure around the service that they pay for. Many consumers, in the past, thought that the advice they received came free with a product bought. It wasn’t always clear, that a portion of the fee they paid for the product, would go towards the commission of the advisor. It will take a mind-shift for consumers to change their financial behaviour to rather pay for a service upfront than to pay a portion of the premium over a longer period of time. This practice of up-front payment requires consumers to regard the service that they receive from financial planners or advisors as a professional service.

We have also seen an increase in the practice of appointing para-planners that service client facing financial planners, therefore awarding the financial planner to spend quality time in front of clients. Supporting this is the notion of developing youngsters through mentorship models or article-type activities. Another characteristic that proves financial services is becoming a profession is the fact that experienced practitioners are taking time to develop and educate future practitioners.

As the South African Qualifications Authority (SAQA) recognised professional body for financial planners in South Africa, FPI has built solid relationships with the Financial Services Board (FSB), National Treasury, the FAIS Ombud and international affiliates (to mention just a few) to ensure that consumers are protected and that we contribute towards a financial services industry that can be trusted. Professional financial planners and advisors, those that belong to a recognised professional body, are one step ahead. They have a reputable organisation that will promote their interests with regulators and policymakers. Now is the time to take up the notion of professionalism, ahead of perhaps feeling forced to do so as a result of the many legislative changes.

Sherma Malan, CFP®, Head: Membership and Corporate Relations at the Financial Planning Institute of Southern Africa (FPI)


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This edition

Issue 72